Scope 3 Report: How Are Supply Chain Leaders Adapting?

A new report from BCG & CDP has found Scope 3 emissions are 26x higher than operational emissions, and Co2 emissions are 1.4x higher than the previous year

A new report from BCG and CDP has revealed that upstream emissions from manufacturing, retail and material sectors increased by 1.4 times the total Co2 emitted in the EU in 2022. 

The “Scope 3 Upstream” Report also highlighted that supply chain emissions are often overlooked, and that companies are twice as likely to measure Scope 1 and 2 emissions than Scope 3. 

The report also found Scope 3 emissions are 26 times higher than operational emissions. 

The report was published by Boston Consulting Group, which partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities, and CDP. 

CDP is a global non-profit that pioneered using capital markets and corporate procurement to motivate companies to disclose their environmental impacts, leading to over 24,000 global organisations disclosing their data through CDP in 2023. 

Report finds Scope 3 emissions neglected 

It identifies the three most significant factors that correlate with ambition and action on Scope 3 upstream emissions:

• Climate-responsible board: Companies with a climate-responsible board, which has climate oversight and competence, are five times more likely to have a Scope 3 target and a 1.5°C aligned transition plan.
• Supplier engagement programmes: Businesses that engage with suppliers on climate-related issues are almost seven times more likely to have a Scope 3 target and a 1.5°C aligned transition plan. However, only four in ten corporations engage with their suppliers.
• Adoption of internal carbon pricing: Companies with an internal carbon price mandated for all business decisions are four times more likely to have a Scope 3 target and a 1.5°C aligned Scope 3 transition plan.

The report also highlights that these companies are 2.4 times more likely to set targets for operational emissions compared with supply chain emissions- and of the businesses which disclose to CDP, only 15% have set a Scope 3 target.

Of the disclosed upstream emissions from just the manufacturing, retail, and materials sectors in 2023, CDP found a carbon liability of over US$335bn. 

The report argues this liability is at risk of being overlooked by supply chain stakeholders. 

“The responsibilities and incentives to act on Scope 3 emissions for corporates and investors converge on risk management, and their oversight bodies must push for risk quantification and management” says Diana Dimitrova, BCG Managing Director and Partner, and Co-Author of the report.

How are supply chain leaders responding to the findings? 

The report has sparked reaction from sustainability and supply chain leaders across the globe, including Kapila Mehta, VP of Sustainability in Schneider Electric’s Power Products division, who talks about the company is committed to helping its partners decarbonise and meet Scope 3 reporting requirements.

“Schneider Electric is committed to partner support as it recognises both the demand for Scope 3 emissions reduction, but also the barriers that its ecosystem faces in meeting mere Scope 1 and 2 requirements,” she adds. 

“This impact will be achieved through a ‘toolbox’, a variety of easy to access digital tools, among which Zeigo Activate, the Sustainability School and much more, enable companies small and large to track and report their operational emissions, making emissions reductions more achievable and profitable,” Kapila concludes. 

Similarly, Sophie Riegel, Sustainability Manager at MongoDB, comments that “Last year [MongoDB] made a commitment to being Net Zero by 2030, and 100% powered by renewables by 2026.” 

“Our first step towards achieving this goal involved understanding the breakdown of our Scope 1, 2 and 3 emissions within our overall carbon footprint. 

“By utilising our emissions data, we can better understand where immediate action is required and more effectively implement carbon reduction strategies.

“We found that our Scope 3 emissions overwhelmingly account for approximately 97.5% of our total footprint.

“A large part of these indirect emissions come from our cloud partners, and we cannot reach Net Zero without collaborating with them. 

“By 2025 our major partners—AWS, Google Cloud (GCP), and Microsoft Azure—will be 100% powered by renewables. 

“By reducing our emissions together, we can help our customers reduce their own carbon impact and their own Scope 3 emissions through MongoDB and the cloud.” 

Original Article – Scope 3 Report: How Are Supply Chain Leaders Adapting? (supplychaindigital.com)